Apple to sell 12 million iPhones in 2008 at reduced price: analyst

Stan Beer
Friday, 19 January 2007 05:37

IT Industry - Market

In the consumer space, like consulting firm iSupply which estimates a 50% margin on iPhone at current prices, TBR believes the current prices of US$499 and US$599 are too expensive for most consumers and that Apple will be forced to cut them. Reduced prices in turn will expose the iPhone to the current iPod market.

"At the current price points, the iPhone is on average 45% more expensive than the iPod video, and around 27% more expensive than high-end smartphones priced at $399. The high price differential makes the device more likely to appeal only to early adopters and consumers evaluating a purchase of both an iPod and a smartphone. As the second and third iterations of the device are launched, TBR expects the price differentials to narrow, exposing the iPhone to a large part of the current demand facing the iPod," the report states.

In the corporate market, TBR believes the iPhone faces strong competition from Windows Mobile-based devices.

"The success of Microsoft’s Window’s Mobile 5.0 in corporate edge-devices is tied to Mobile versions of Office for productivity and Outlook for e-mail that connect securely back to corporate servers," the report states.

"In addition, Microsoft’s security, device monitoring, auditing and remote cleansing of devices provides corporate IT managers relief in managing and controlling data on the growing number of edge-devices. Apple will need to replace or adopt this functionality if the company seeks to challenge Microsoft Mobile among corporate users. Furthermore, exclusivity of Apple’s deal with Cingular may hinder the company’s
progress in the corporate market."

According to TBR, missing features from the iPhone such as wireless downloads and no 3G capability may be a deliberate and calculated strategy to maximize both coverage and revenue.

"Notably absent from the first version of the iPhone is high-speed connectivity on Cingular’s UMTS/HSDPA network, currently being rolled out nationwide. The iPhone instead operates on Cingular’s 2.5G EDGE network, which offers substantially lower throughput, but a much more
comprehensive footprint," the report state.

"Another missing feature is the over-the-air download capability currently available on music services of both Verizon Wireless and Sprint Nextel. TBR believes Apple may have concluded that it would not be able to replicate the iTunes customer experience onto the iPhone, and, in any event, iTunes customers are already familiar with the sideloading process of transferring music andvideo content from the PC. Pragmatically, avoiding over-the-air downloads also prevents Apple from having to share revenue with Cingular for transferring content over its data network."

The report has been released amidst a tempering of market analysts' expectations for Apple in the coming quarter. After spectacular rises following the release of iPhone, Apple shares have come back to earth a little, dropping 4% in the past day.